Risk sentiment took hits on Wednesday as U.S.-China trade headlines dominated. Gold hit record highs while tech stocks took a beating after the U.S. government announced new export bans and tariff threats.
The action-packed day also saw the Bank of Canada pause its rate-cutting cycle, Powell warn about economic slowdown, and oil prices jump on news of sanctions targeting Chinese importers of Iranian crude.
Here are the updates from the latest trading sessions!
Headlines:
- U.S. White House said China could face up to 245% tariff on imports to the U.S. “as a result of its retaliatory actions”
- Hong Kong Post suspends all package shipments “destined to the U.S. with immediate effect,” citing U.S. tariff policies
- U.S. issues new sanctions targeting Chinese importers of Iranian oil
- U.S. semiconductor equipment giant ASML fell over 4% on missed earnings and CEO warning that tariff uncertainties could land full-year revenue at the lower end of expectations
- China retail sales for March: 5.9% y/y (4.4% y/y forecast; 4.0% y/y previous)
- China industrial production for March: 7.7% y/y (5.8% y/y forecast; 5.9% y/y previous)
- China GDP for Q1 2025: 5.4% y/y (5.2% forecast; 5.4% previous); 1.2% q/q (1.5% forecast; 1.6% previous)
- U.K. consumer prices for March: 0.3% m/m (0.4% forecast; 0.4% previous); 2.6% y/y (2.8% forecast; 2.8% previous)
- U.K. core consumer prices for March: 3.4% y/y (3.3% forecast; 3.5% previous); 0.5% m/m (0.4% forecast; 0.4% previous)
- U.S. retail sales for March: 1.4% m/m (1.1% forecast; 0.2% previous); 4.6% y/y (2.6% forecast; 3.1% previous)
- U.S. industrial production for March: 1.3% y/y (1.2% forecast; 1.4% previous); -0.3% m/m (-0.2% forecast; 0.7% previous)
- U.S. President Trump ordered a probe into potential new tariffs on all U.S. critical minerals imports
- Bank of Canada kept its interest rate at 2.75% in April after seven consecutive cuts
- U.S. EIA crude oil stocks change for the week ending April 11: 0.52M (2.55M previous)
- U.S. Fed Chair Powell gave remarks at the Economic Club of Chicago that set a high bar for further policy easing
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
The major assets priced in risk aversion on Wednesday, as escalating U.S.-China trade tensions overshadowed initially positive sentiment.
Early optimism stemming from strong Chinese economic data (with Q1 GDP growth at 5.4% and industrial output surging to 7.7%) quickly faded after the U.S. government banned Nvidia’s H20 chip exports to China, causing the company to take a $5.5 billion charge. Trump’s additional probe into potential tariffs on critical minerals imports further heightened trade war uncertainty.
Tech stocks led the decline, with Nvidia plunging 6.9% and AMD falling 7.35%. The Nasdaq dropped 3.1%, while the S&P 500 and Dow fell 2.2% and 1.7%, respectively. European markets closed mixed, with Germany’s DAX and UK’s FTSE gaining marginally while France’s CAC edged lower.
Fed Chair Powell acknowledged an economic slowdown while maintaining a wait-and-see approach on rates, warning that tariffs would likely increase inflation and hamper growth. Meanwhile, gold surged 3.4% to a record above $3,340 as investors sought safe havens.
U.S. oil prices climbed 1.9% to $62.20 after the U.S. imposed sanctions on Chinese importers of Iranian crude. 10-year Treasury yields initially fluctuated but ultimately ended lower as investors processed the economic implications of expanding trade restrictions. Bitcoin remained relatively resilient around $84,500, fluctuating within a narrow range despite the market turbulence.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Major Currencies Chart by TradingView
The U.S. dollar traded lower on Wednesday, helped by U.S.-China trade war concerns and Powell’s concerns over U.S. growth and inflation.
Early in the day, the Greenback weakened considerably following China’s stronger-than-expected economic data, including Q1 GDP at 5.4% and robust industrial output at 7.7%. This positive data combined with reports that China was “open to talks if Trump shows respect” fostered temporary optimism, driving investors away from the safe-haven dollar.
A brief reversal occurred during the early European session, with the dollar gaining against traditional safe havens like CHF and JPY, particularly after U.K. CPI data came in below expectations at 2.6%.
Bank of Canada’s (BOC) decision to hold rates at 2.75% introduced more volatility, though the Canadian dollar strengthened as markets appreciated the BOC’s cautious stance amid trade uncertainties, with USD/CAD declining to 1.3924.
Later, Fed Chair Powell’s speech initially supported the dollar with his wait-and-see approach on rates, but as markets digested his warnings about tariffs potentially raising inflation while slowing growth, dollar sentiment deteriorated significantly. By session’s end, the dollar index had fallen approximately 0.7% to its lowest level since April 2022.
Upcoming Potential Catalysts on the Economic Calendar:
- Swiss balance of trade for March at 6:00 am GMT
- Germany producer prices index for March at 6:00 am GMT
- ECB interest rate decision at 12:15 pm GMT
- Canada foreign securities purchases for February at 12:30 pm GMT
- U.S. housing starts for March at 12:30 pm GMT
- U.S. building permits (preliminary) for March at 12:30 pm GMT
- U.S. initial jobless claims for April 12 at 12:30 pm GMT
- U.S. Philadelphia Fed manufacturing index for April at 12:30 pm GMT
- ECB press conference at 12:45 pm GMT
- U.S. Fed Barr speech at 3:45 pm GMT
- U.S. Fed balance sheet for April 16 at 8:30 pm GMT
- Japan consumer prices index for March at 11:30 pm GMT
The European session will likely be all about the ECB, with traders bracing for a likely rate cut followed by a press conference that may affect EUR volatility.
Over in the U.S., a packed lineup including housing starts, building permits, jobless claims, and the Philly Fed index may drive the dollar’s next move, especially if data surprises on the growth or labor front.
Of course, don’t forget to watch out for any global trade-related updates or end-of-week flows that may affect overall risk sentiment!
As always, stay nimble and don’t forget to check out our Forex Correlation Calculator when taking any trades!